Allregal Corporation Pty Ltd v Ghirardi - [2001] WADC 79

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ALLREGAL CORPORATION PTY LTD -v- GHIRARDI & ANOR [2001] WADC 79

CORAM: GROVES DCJ

HEARD: 20 MARCH 2001

DELIVERED : Delivered Extemporaneously on 22 MARCH 2001 typed from tape and edited by Judge

FILE NO/S: CIV 343 of 2000

BETWEEN: ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)
Plaintiff
AND
PATRICK JOHN GHIRARDI
First Defendant
JOANNE ELIZABETH GHIRARDI
Second Defendant
RODNEY JOHN CHAPMAN
First Third Party
ELIZABETH MARY CHAPMAN
Second Third Party
BRUCE ALEXANDER CHAPMAN
Third Third Party
IAIN LAWLESS
Fourth Third Party
(BY ORIGINAL ACTION)
PATRICK JOHN GHIRARDI
First Plaintiff
JOANNE ELIZABETH GHIRARDI
Second Plaintiff
AND
ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)
Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice - Stay of Execution pending appeal - Special circumstances required - Application refused

Legislation:

Rules of the Supreme Court of Western Australia, O 47, r 13

Result:

Application refused

Representation:

Original Action

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Mr R J L McCormack
Second Defendant         :     Mr R J L McCormack
First Third Party           :     Not Applicable
Second Third Party       :     Not Applicable
Third Third Party          :     Not Applicable
Fourth Third Party        :     Not Applicable

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Paynes
Second Defendant         :     Paynes
First Third Party           :     Not Applicable
Second Third Party       :     Not Applicable
Third Third Party          :     Not Applicable
Fourth Third Party        :     Not Applicable

Counterclaim

Counsel:

First Plaintiff                :     Mr R J L McCormack
Second Plaintiff            :     Mr R J L McCormack
Defendant:     Mr M L Bennett

Solicitors:

First Plaintiff                :     Paynes
Second Plaintiff            :     Paynes
Defendant:     Bennett & Co

Case(s) referred to in judgment(s):

Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685
Commissioner of Taxation (Cth) v Myer Emporium Ltd (No 1) (1986) 160 CLR 220
Cox v Simeon, unreported; FCt SCt of WA, Library No 5063; 7 September 1983
Hamersley Iron v Lovell (No 2) (1998) 20 WAR 79
TCN Channel 9 Pty Ltd v Antoniadis (1999) 48 NSWLR 381

Case(s) also cited:

Bell Wholesale Co Pty Ltd v Gales Export Corporation (1984) 52 ALR 176
Hume & Dolan v Maher, unreported; SCt of WA; Library No 980643; 29 October 1998
Laundry Coin Wash Nominees Pty Ltd v Dunlop Olympic Ltd & Ors (1985) ATPR 40-584

GROVES DCJ: On 22 February 2001 I ordered summary judgment be entered for the plaintiff against the first and second defendants in the sum of $151,759.18 with costs and interest. It was also ordered that there be a stay of execution for 21 days. On 13 March 2001 the first and second defendants filed in the Supreme Court of Western Australia notice of appeal against the judgment.
The application for consideration now is one whereby the first and second defendants seek an extension of the stay of execution until determination of the appeal to the Supreme Court. The application is made pursuant to Order 47 rule 13 of the Rules of the Supreme Court which relevantly provides:
"[47.13]Power to stay execution
13(1)The Court, if satisfied by the judgment debtor or other person liable to execution under a judgment or order ‑
(a)that by reason of special circumstances it is inexpedient to enforce the judgment or order; or
(b) [repealed]
(c)that if the judgment or order is for the payment of money, the applicant is unable from any cause to pay the money,
may stay the execution for such period and on such terms as the Court thinks fit.
(2)An application under this Rule which is not made at the time the judgment is given or the order made, must be made by summons supported by an affidavit of grounds, and may be so made although the applicant did not enter an appearance in the action.
(3)Where the application is made on the ground of the applicant's inability to pay, the affidavit must disclose his income, assets and liabilities."
Seaman in Supreme Court Civil Procedure in his commentary at par 47.13.1 suggests that in determining whether there are special circumstances which render it inexpedient to enforce a judgment because of a pending appeal, the Court will be guided by the principles applied by the Full Court before granting a stay pending an appeal or an application to the High Court for special leave to appeal; see Rules of the Supreme Court O 63 r 15 and Seaman's commentary at par 63.15.1 and following and commentary par 63.15.4B.
Those principles are well settled. It is nonetheless relevant to state:
(1)the discretion to stay execution pending an appeal must be exercised judicially but is otherwise unfettered.
(2)the discretion will only be exercised where special circumstances exist justifying departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal; see Commissioner of Taxation (Cth) v Myer Emporium Ltd (No 1)(1986) 160 CLR 220 at 222‑223;.
(3)the onus is upon the applicant to demonstrate a proper basis for a stay which will be fair to all parties and the court will weigh the balance of convenience and the rights of the parties; see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694;
(4)special circumstances will exist if there is "a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed" (per Dawson J in Commissioner of Taxation (Cth) v Myer Emporium Ltd (No 1) (supra) at pages 222-223;
(5)inconvenience and the possibility of some risk to the appellant's property do not constitute special circumstances (see Cox v Simeon, unreported; FCt SCt of WA, Library No 5063; 7 September 1983) nor does the preservation of the status quo nor by themselves do the merits of the appeal; see generally Hamersley Iron v Lovell (No 2) (1998) 20 WAR 79.
I turn now to address the present application. The application to extend the stay on execution is supported by an affidavit sworn by the first defendant on his own and the second defendant's behalf. So far as is relevant he deposes:
"3.Significant costs have been incurred by us, the defendants in this action to date and our financial resources would be significantly strained if we had to simultaneously fund the Supreme Court appeal, pay the Judgment and be able to progress resolution of the third party actions we have commenced herein, as well as defend the counter‑claim, brought against us in the third party actions.
4.I have caused an up‑to‑date search to be made of the plaintiff with the Australian Securities and Investments Commission Exhibited hereto and marked "B" is a copy of that search.
5.By reference to the search, I note that the plaintiff has an issued share capital of $10.00 and, thus, I believe that it may be unable to repay the Judgement paid to it in the event that an appeal is successful.
6.I further note that the first and second third parties are the only directors of the plaintiff."
As to the claim that the first and second defendants' financial resources would be significantly strained, I was advised by their counsel that the application is not based on an inability to pay the judgment debt, thus reliance is not placed on O 47 r 13(1)(c) and r 13(3). Given that financial hardship is specifically provided for in this way by the rules, I do not consider the fact that the first and second defendants' financial circumstances may be strained of itself amounts to a special circumstance which would warrant a stay.
The second ground raised on the affidavit is as to the deponent's belief that the plaintiff "may be unable to repay the judgment in the event that the appeal is successful". Support for this submission was, it was said, to be found in the statement made in TCN Channel 9 Pty Ltd v Antoniadis (1999) 48 NSWLR 381 where at p 385 the New South Wales Court of Appeal said:
"This Court regularly stays execution on judgments pending an appeal where there is a risk that the plaintiff will be unable to repay the money without difficulty or delay if the appeal were to succeed.
Adherence to this principle would have prevented the present embarrassing situation where the Court has enforced interim payment to the plaintiff but repayment cannot or will not be made without further litigation in the Federal Court with a risk that the opponent will be made bankrupt without the claimant recovering its money."
Whilst I do not cavil with that statement, it has to be appreciated that the comparative New South Wales legislation does not include the need for "special circumstances". This distinction was adverted to by Ipp J in Hamersley Iron v Lovell (No 2) (supra) at 82. In response to this ground, Rodney John Chapman, a director of the plaintiff, deposed in an affidavit sworn 19 March 2001, so far as is relevant, as follows:
"3.Mr Ghirardi makes reference to the Plaintiff having an issued share capital of $10.00. He asserts that the Plaintiff may be unable to repay the judgment paid to it in the event that the Defendants' appeal is successful.
4.The Plaintiff is the trustee of the Dorzil Family Trust which was created by a Deed dated 17 December 1999…
5.Pursuant to clause 7.8 the Plaintiff has a right of indemnity from the Trust Fund.
6.In its capacity as trustee of the Dorzil Family Trust the Plaintiff carries on the business of a restaurant under the name "Star Bistro" at the corner of Stirling Highway and Bayview Terrace, Claremont. The business has not been conducted long enough for a full set of annual accounts to be brought into existence. Nor has there been sufficient time for me to prepare a set of special purpose accounts."
Here I should note that Mr Chapman only had 3 days to respond to the application, which days included a weekend.
"7.From my knowledge as a qualified accountant I can say that ‑
(a)the Plaintiff is paying its debts as and when they fall due;
(b)for the purposes of running the restaurant business, the Plaintiff maintains an overdraft facility with BankWest which has a limit of $60,000.00. The overdraft usually fluctuates between $40,000.00 and $50,000.00;
(c)if offered for sale, I believe that the restaurant would sell for not less than $250,000.00. The basis of my belief is that two other restaurants have sold in the last 12 months within 200 metres of Star Bistro for significant sums of money. I verily believe that a restaurant called Pronto is on the market for $450,000.00 and a restaurant named Bellisimo sold for over $1 million. In addition, the Astoria restaurant sold for $350,000.00 and I believe a further $500,000.00 was spent on upgrading the restaurant.
8.If there was any doubt as to the ability of the Plaintiff to meet the repayment of the judgment sum then my wife who is also a director of the Plaintiff and I would be prepared to offer a written guarantee to the court to repay the money from our own assets. My assets as at today's date include properties and other securities. One of these properties is a water front block of land situated at 126 Spoonbill Retreat at Port Bouvard and is valued at $240,000.00."
The information presented to the court purports to indicate that the plaintiff by reason of the trust asset and its right of indemnity from the trust fund would be in a position to repay the judgment in the event that the appeal is successful. Furthermore if the stay of execution is not granted, the trust fund will include the amount of the judgment debt and accumulated interest. Whilst it is appreciated that Mr Chapman had little time to respond to the application, a more complete financial snapshot of the plaintiff and the trust fund might have further allayed concerns as to its financial health.
That shortcoming is addressed however by Mr and Mrs Chapman, the directors of the plaintiff, offering their written guarantee to the court to repay, if need be, the money from their personal assets. If the application for a stay is refused, it will be conditional upon that guarantee or undertaking being given. That will offset the concern about incomplete financial information of the plaintiff and the trust.
It was suggested in argument by counsel for the first and second defendants that the trust could be stripped of its assets and that the judgment debtor's right (upon the appeal being successful) to be repaid the money would be defeated. That speculation, it has to be said, can cut both ways. If the stay is granted, what is to stop the first and second defendants disposing of assets against the risk of their appeal being unsuccessful? I merely say that to demonstrate the circuity of that argument. Besides, as I have earlier indicated, "some risk to the appellant's property" does not constitute special circumstances. That risk in any event is diminished by the proposed personal guarantee of the directors of the plaintiff. In those circumstances this ground of concern does not amount to special circumstances which would warrant a stay of execution.
Although not stated as grounds in the affidavit in support as required by O 47 r 13(2), counsel for the first and second defendant raised additional matters in argument. They can be shortly disposed of. It was contended, as I understood the argument, that Mr Chapman's inclusion of reference to the Port Bouvard property as an asset in par 8 of his affidavit was a "doubling up" in that it was the property over which National Australia Bank had security for $102,500 and to which the co‑guarantors could have resort if need be. In effect it was proposed that the status quo as existed prior to assignment of the debt should be preserved or protected.
What the ultimate outcome of this litigation might be is not for me to speculate. As matters presently stand, the plaintiff is entitled to the fruits of its judgment. The granting of a stay of execution for this contended purpose does not amount to a special circumstance in any event. Further the Deed on Securities (refer par 14 of my Reasons on the summary judgment application) by cl 2.5 provided that the Chapman mortgage would be discharged on or before the second anniversary of the Deed. That time has long since elapsed in any event. In my view this argument lacks substance.
It was further argued that by reason of the counterclaim and third party proceedings against the co‑guarantors being pursued, that a stay should be granted. It was said that the first and second defendants would be left to carry the whole of the debt pending recovery of contribution from co‑guarantors. The guarantee, the terms of which are more fully outlined in my earlier judgment, clearly provides for the lender to recover the whole of the indebtedness from one or some of the guarantors. There is no suggestion that it should forbear, after having made demand on one guarantor whilst that guarantor collected contributions from co‑guarantors. As unfortunate as that may be for the first and second defendants, the fact remains that the plaintiff is entitled to recover the whole of the judgment debt from them.
Finally it was argued that because on the one hand the first and second defendants were individuals and would be under financial strain and on the other hand that the plaintiff had not stated any prejudice by being kept out of its entitlement, there was an imbalance of need. That argument has no merit whatsoever. There is no onus on the plaintiff to establish prejudice; the onus is on the first and second defendants to demonstrate a proper basis for a stay.
I have concluded, subject as I said earlier to the proper guarantee/undertaking being given, that the first and second defendants have failed to make out, either on individual grounds or on a combination of the whole of the grounds raised and argued, that there are special circumstances which would render it inexpedient to enforce the judgment.
The application for an extension of the stay of execution will be dismissed subject to the proposed undertakings being given.